The world of life insurance is mostly boring statistics, actuarial tables and creepy TV commercials. But there are also some exotic twists in the insurance world, and one of them is the basis for my investing idea.
The twist is the viatical settlement, an old idea that got a new lease on life (sorry) when the AIDS crisis first flared up. The idea was that AIDS patients–who had limited life expectancies before today’s medications were developed–would sell the rights to their life insurance settlements, then take the money and use it for medical expenses, or a last vacation, or whatever they wished.
Interest in viaticals flagged once AIDS became a survivable illness, and it has taken the aging of the Baby Boomers to revive it. Using viaticals and another transaction called a life settlement (in which people over 65 years old and with a life expectancy of less than 15 years take a lump sum in return for the right to their life benefit) a company called Life Partners (LPHI) has established a thriving business.
Texas-based Life Partners has done very well with offering this option to elderly people with multiple policies, expiring term policies or plans to make charitable donations. LPHI has had its ups and downs, but its current run has taken it from 12 to 36 before a correction in the past couple of days. Revenues and earnings are growing and institutional support is scarce, leaving lots of room for growth. Unfortunately, the stock trades just 82,000 shares a day, on average, which will probably keep it from qualifying as a recommendation in one of our growth publications.
Life Partners isn’t one of the emerging markets stocks that I usually follow and write about. But I’m always fascinated by the odd businesses that growth-investing research brings to my attention.